Indian realty players already under pressure from plunging sales and liquidity issues, may be forced to opt for restructuring loans in 2012.
Industry experts say these loans amount to around $3-4 billion (about Rs. 15,000 crore).
Last week, credit rating agency Crisil downgraded India’s biggest real estate player DLF’s non converting debentures and other debt programmes. But DLF said it will be able to generate cash flows by selling its upcoming projects. However, other players too would find it hard to raise liquidity in the given situation.
“With hints of downward movement in interest rates, borrowing cost may reduce in 2012, but liquidity pressures expected to remain,” said Shobhit Agarwal, MD, Protiviti India.
The biggest 15 listed real estate companies show a total debt of around Rs. 10,000 crore on their balance sheet by the end of the September quarter.
According to the Reserve Bank of India, the total lending to (commercial) real estate sector by mid-November stood at Rs. 117,000 crore. Research firms have indicated the gross NPAs of banks could be anywhere around 3% of the total lending.
Industry experts point out that real estate players have been paying anywhere around 15-16% interests to banks and about 18% to non banking finance companies (NBFCs).
“The debt and inventories on the balance sheets of listed developers are high and the sector could see restructuring of loans as many are facing cash flow situations,” said Ambar Maheshwari, MD, corporate finance, Jones Lang LaSalle India, a realty consultant.